Expert: Armenia inefficiently uses external borrowing

ArmInfo. Until now, the credit funds attracted by Armenia have been used rather inefficiently. Head of the Employers' Union of Armenia Gagik Makaryan expressed this opinion at a meeting with journalists.

In particular, as stated by Makaryan, the excessive dispersion of funds can be stated with confidence in the sphere of education, ecology, road construction, community management. The reason is that, according to the expert, very often political interests prevail over economic and social interests.

In addition, according to the economist, the previous two issues of Eurobonds turned out to be ineffective. "It was a utopia, and their effectiveness is not clear to me personally," he said. At the same time, he expressed hope that the next tranche will be implemented with greater care, since the early ones were initiated by the former government of Armenia.

Nevertheless, the expert does not see any problems in terms of servicing the growing national debt of the country, but only if the outpacing rates of economic growth remain. "We can not say that servicing the national debt will be easy, especially in 2020, but I think we will manage," concluded the head of the Union of Workers. By now Armenia has carried out two issues of Eurobonds. The first issue was made on September 19, 2013 - by $ 700 million and the government repaid ahead of schedule the loan taken from Russia for $ 500 million. The second tranche of sovereign bonds worth $ 500 million for a period of 10 years and with a yield of 7.5% Armenia carried out 19 March 2015. The proceeds from the second issue of Eurobonds were $ 487 million. Part of the amount received from the sale of the bond tranches, in the amount of $ 205 million, went for the purchase of the first issue of Eurobonds with maturity in 2020. The remaining amount was transferred to the treasury account of the Republic of Armenia and the country's budget system. As the experts stated, this, in fact, was the most expensive external debt that was ever attracted by the government of the country.

As Arshaluys Margaryan, the head of the State Debt Department of the Ministry of Finance of Armenia, told ArmInfo the year before, the Armenian government plans to issue a new issue of Eurobonds only in early 2020. According to him, if by the end of 2019 Armenia does not face an unconventional situation, when the only solution is a new issue of Eurobonds, another issue is expected to ensure the repayment of the state debt in 2020. The volume of the issue, as noted by Margaryan, will be similar to the amount that will be spent on servicing the state debt on Eurobonds - $ 500 million or even slightly higher.

Meanwhile, according to the National Statistical Service, the aggregate state debt of Armenia at the end of 2017 amounted to $ 6.774.6 million, an increase of 14% or $ 832.5 million compared to the end of 2016. At the same time, the external state debt of the republic at the end of 2017 was $ 5 494.9 million, an increase over the year by 14.3%, or by $ 689.3 million. According to the State Debt Strategy for 2018-2020, in 2018, $ 666 million will be allocated for debt servicing, in 2019 - $ 710.7 million, and in 2020 - already $ 1.37 billion. The growing national debt and continuing migration in Armenia have already deepened the specific debt burden per capita to $ 2.3 thousand by January 1, 2018, of which over $ 1.8 thousand comes from external debt, against $ 2 thousand and $ 1.6 thousand respectively, by January 1, 2017. Given the actual scale of migration, the burden of public debt per capita would be much higher. According to statistical data, as of January 1, 2018 the population of the RA amounted to 2.973 million, against 2.986 million a year earlier and 3.274 million five years earlier.

According to the budget, by the end of 2018, the state debt, from $ 6.8 billion by the end of this year, will grow to $ 7.2 billion and amount to 60% of GDP. According to the World Bank forecasts, the share of Armenia's national debt in GDP will grow to 59.6% in 2018, from 58.9% in 2017, and the external debt to 48.4% from 47.9% in 2017. In 2019, the World Bank predicts a decline in the share of public debt in GDP to 59.3%, and external debt in GDP - up to 48%.